The City of Detroit's financial picture continues to worsen with a deficit forecast Friday as high as $300 million, increasing the likelihood of massive cuts in city services.
As first reported Friday on freep.com, Mayor Ken Cockrel Jr., in announcing the larger deficit estimate, said he already had ordered city departments to cut their budgets by 10%, and now the size of the cuts would increase. Cockrel would not say if any cuts would involve layoffs.
As recently as a month ago, Cockrel had pegged the deficit at as high as $200 million. He said the steadily rising deficit estimate is the result of sloppy bookkeeping by ex-Mayor Kwame Kilpatrick's administration.
The city is almost a year late in submitting its 2006-07 fiscal year audit.
"This whole process has been a lot like peeling back the layers of an onion -- the more you peel back, the more your eyes water," Cockrel told the Free Press. "Citizens need to be prepared for some pain."
Chief Financial Officer Joseph Harris said he advised Cockrel of the new deficit estimate after reviewing the city's current year cash flow, which is negative, as a number of payments to vendors and on city debt have come due. He said major cuts would be needed.
"I'll give him several alternatives, but none of them are pretty," he said of the plans he would offer to the mayor.
The situation is a stark contrast from what Kilpatrick had told the public about the city's budget. He had insisted that the city was on the cusp of eliminating its red ink. The city's budget is $3 billion.
In early October, Cockrel had said he would release his deficit elimination plan within days. But the mayor has delayed that announcement because as the city catches up on its auditing, it discovers more records showing the deficit is far worse than thought, he said.
Cockrel said Friday that he would not unveil his deficit elimination plan until his administration fully untangles the city's finances. He said he would provide an update in January.
However, Cockrel did say the plan would seek to protect essential city services.
"Our goal is to get back on the path of being fiscally smart, make decisions based on what is critical and necessary ... for the city," he said.
The state already has ordered an emergency financial manager for the Detroit Public Schools, and a potentially $300-million deficit could reignite talk that arose in Kilpatrick's first term about a possible emergency manager for the city. Cockrel said the city must fix its books and avoid the scenario in the Detroit schools.
"If there's tough decisions to be made, we ought to be the ones to make them," he said.
Councilwoman Sheila Cockrel, chairwoman of the council's Budget, Finance and Audit Committee, praised Harris for working to systemically uncover the city's true financial picture.
"The structural problems of the country, the state are really colliding head-on now with the structural weaknesses in Detroit's finances that are now decades old," she said. "I think we can anticipate serious levels of sacrifice."
